In my experience of an experienced investor, if the startup does not go bankrupt in the first few years, he lives on average five to 10 years. Then the startup is sold or – in about 10% of cases – it is public via IPO.
But the offers of mergers and acquisitions are definitely a more likely result of the exit, and when it is done, they will be a favorable offer for each side: the buyer expands his product line and customer base, while the startup founders are awarded for their labor.
If the founder initially plans to sell a startup as soon as possible, he should consider it immediately. As a serial entrepreneur and investor, I can say what a buyer is looking for in the founders who want to quickly return the project and sell it to a great actor.
Important considerations for corporations
When considering buying a startup, corporations assess his ability to achieve their strategic and financial goals. Corporations most frequently consider:
- Market share and stable growth: Corporations are interested in projects that have already gained a tangible market share and have shown stable growth along key indicators. In this case, the startup allows the corporation to immediately expand its presence on the market.
- Team: To ensure a smooth transition and integration with corporate culture, the Acquiring corporation may prioritize the stopping of the startup team. Key team members should have flexibility and adaptability mandatory for development in latest conditions and in the corporate environment.
- Cap table: The contract may fall because people in jurisdiction in accordance with sanctions or related Politically exposed people They are in the START -UP table.
- Selection of high bay: Corporations may refuse a contract if the audit shows errors in documents that can not be corrected. They listen to the level of mental property protection, a form of business registration, a way of distribution of shares and the manner of performing employment contracts with employees.
- Jurisdiction of the startup: For potential buyers, it is mandatory for the jurisdiction of the country in which the startup is registered is recognized throughout the world and has a stable legal system
Things to consider the founders
From the very beginning, the founders must determine the priority of a possible startup output strategy, not only product development.
My recommendations:
Consider going out from the very beginning: Before launching the project, analyze the market of potential customers and potential buyers. Corporations often prefer Taking over firms from the same industries in which they operate. For example, Gigant FinTech, for example, Stripe announced that he would buy Stablecoin platform Bridge for $ 1.1 billion. Market intelligence platform Alfasense He agreed to buy his competitor Active In a contract price $ 930 million. Or here is the local example of Kazakhstan: Freedom Holding Corp.which provides financial services, acquired Air and railway reservation services Abathan AND Chocotractable for $ 32.3 million in 2023.
Stick to surgery: When the product achieves early success, the founders often begin to participate in conferences as an alternative of focusing on development. They mistakenly consider that the business model will increase. This illusion leads to an increase in the incorrect model, and not finding the one that works. Ultimately, startups burn money for marketing without building a loyal customer base, making it unattractive to corporations.
Keep a good relationship with potential buyers, but don’t let anyone control you: Often, corporations invest early in large checks, offering offers resembling USD 1 million for 20% of shares. In the case of a startup, such a contract with a potential buyer is like a contract with the devil-these can create a dependence on the investor, discouraging other buyers. Do not give strategic buyers greater than 5%of shares and limit the shares of early investors to 10-15%.
Do not save with the appropriate startups: Many startups try to get monetary savings, dealing with every part alone, but often make expensive mistakes. When it comes to negotiations with a corporation, these errors can delay or derail the contract.